The PostCell-Phone World

LAS VEGAS -- The $16 billion that Verizon and AT&T just spent on the 700-MHz radio spectrum wasn't about cell phones. Verizon's Open Device conference wasn't about cell phones. And Motorola's split into two companies? Investors see growth there, just not necessarily in cell phones.

Sure, there have been plenty of new cell phones at this week's CTIA Wireless trade show. But over the past few weeks we've seen the major wireless players looking more at the postcell-phone world.

Sprint's two big press conferences at CTIA on Tuesday exemplified the cusp the industry is on. First, Sprint showed off the new Samsung Instinct phone. It's a multimedia cell phone that is sold highly subsidized, locked into Sprint, with a two-year contract. That's the old way of doing business.

But then Sprint showed off the first gadget for its new WiMAX network, the Nokia N810 WiMAX edition. The N810 is an ungainly adolescent of a pocket computer, but it's not a phone. It's a larva of the future, when all sorts of things will connect to networks that once hosted primarily phones.

Sprint's Xohm WiMAX network, Verizon's "open" network, and the new 700-MHz networks won't be used for phones (at least not much). They'll be used for digital cameras, camcorders, MP3 players, portable video and TV players, GPS systems, cars, handheld gaming systems, vending machines, home- and office-security systems, laptop and desktop PCs, and those tablet-UMPC-handheld-computer thingies that nobody can quite figure out what to do with yet.

See? After that list, you aren't even missing the phones. And it's not as if cell phones are going away anytime soon. They're just getting a whole lot of wireless friends.

At Verizon's Open Device conference, I ran into a guy who used to work with phones and now works with a company that makes digital cameras and camcorders. He wasn't interested in competing with Verizon's stores, service plans, and highly subsidized phones. He wanted to see if they could hook some digital cameras up to Verizon's network to upload photos to the Internet.

It's surprising how some big players just don't get it. At the Verizon conference, a Radio Shack exec got up to talk about how to sell your unlocked, unsubsidized cell phone at Radio Shack. Several people asked the obvious question: Who's going to buy expensive, "open" phones while the carriers are still flooding the market with highly subsidized "free" phones? Only a relatively small elite of geeks and dissidents, the kinds of people who build their own PCs and then maybe even install Linux.

The economics of subsidies are going to keep the cell-phone marketplace relatively untroubled as the market for non-cell-phone wireless devices expands. Some of Verizon's new spectrum has a rather vague "open-access requirement," but Verizon showed what the company will do when the reps explained that Verizon's whole existing network is going "open access," too. All you need to do is get your device certified, for somewhere between $50,000 and $600,000. Then, if it's a phone, you need to go up against Verizon's line of highly subsidized "free" handsets, which will be $200 cheaper than whatever you're offering. That makes the "open" world pretty unpalatable for new phone purveyors, unless they're relatively large foreign players like Alcatel.

Verizon knows that. Activist investor Carl Icahn, horrifying predator that he is, knows that, too. He finally forced Motorola to split its phone division off so that he can invest primarily in the division that makes cable set-top boxes, enterprise stuff, and network equipment. All of these non-phone devices are going to need a lot of network equipment. Phones? Yawn.

What does this mean for you? Want the bad news first? We're not getting those fancy European cell phones. Two-year contracts and early termination fees aren't going away. Despite the merits of cell-phone freedom, there's absolutely nothing in the $16 billion of new spectrum allotments that requires it. (The spectrum doesn't even have to be used with phones.) Moreover, Americans like free stuff, and that will keep them tethered to conservative cell-phone providers for years to come.

But here's the good news. Verizon, Sprint, and AT&T want to get everything online. That means every device you have becomes an endpoint for the Internet. That's a scary idea for desktop PC manufacturers, whose products will no longer be "digital hubs" for content. But it offers more connectivity and flexibility for pretty much everything you do.

PCMag.com's lead mobile analyst, Sascha Segan, has reviewed hundreds of smartphones, tablets and other gadgets in more than 9 years with PCMag. He's the head of our Fastest Mobile Networks project, one of the hosts of the daily PCMag Live Web show and speaks frequently in mass media on cell-phone-related issues. His commentary has appeared on ABC, the BBC, the CBC, CNBC, CNN, Fox News, and in newspapers from San Antonio, Texas to Edmonton, Alberta.
Segan is also a multiple award-winning travel writer, having contributed...
More »

Automatic Renewal Program: Your subscription will continue without interruption for as long as you wish, unless
you instruct us otherwise. Your subscription will automatically renew at the end of the term unless you authorize
cancellation. Each year, you'll receive a notice and you authorize that your credit/debit card will be charged the
annual subscription rate(s). You may cancel at any time during your subscription and receive a full refund on all
unsent issues. If your credit/debit card or other billing method can not be charged, we will bill you directly instead. Contact Customer Service